Council defends stance on NRG

As discussed, I am sending this as a follow up to our discussion regarding The Business Council’s May 29 statement on the Public Service Commission’s review of repowering Dunkirk and Cayuga.

As you know, The Business Council has a large and diverse membership, including some power generators and energy utilities. But the vast majority of our members are industrial and commercial businesses, for whom the cost of energy is a significant competitiveness issue.

New York state has historically had high energy prices, driven by regulatory requirements (resulting in use of high-cost fuels and expensive technology) and high taxes, especially high property taxes. When we moved to competitive electric markets in 2001, it was seen as a risky move by some, but it has produced real benefits, with current wholesale electric energy prices in New York at 12-year lows.

Even so, New York continues to impose new taxes, fees and assessments on the energy sector – about $1.8 billions’ worth, including the just-extended Article 18-a tax – and these costs are borne directly by our business members as well as residential taxpayers.

The Business Council believes that creating an economically competitive business climate is the only long-term solution for the upstate economy. New York needs to promote private sector investment and private sector jobs. Adding unnecessary costs and financial exposure to the electric ratepayer is contrary to that goal.

The Business Council does not oppose NRG investing in and repowering its Dunkirk facility, provided that the PSC does not mandate that ratepayers take on part of the financing risk through an out-of-market power purchase contract. The Business Council opposed this specific proposal which NRG advanced and which runs counter to New York’s now dynamic and competitive energy market where capital costs and associated risks for conventional projects are borne by the developer, not by the ratepayer. Proposed Option 1A is projected to add significantly to power delivery rates in western New York, and have an adverse impact on regional jobs as well.

Our position supporting New York’s competitive energy markets has been developed and supported by our diverse membership, including manufacturers, generators and utilities. The Business Council’s members believe that customers should not be forced to bear the market risk and cost of repowering projects.

Yes, we could have been clearer in articulating our concerns, and done a better job informing our local partners of our efforts. But for us, the bottom line remains the same.

New York’s dynamic and competitive energy market has provided New York consumers with more reliable generation, historically lower wholesale electricity costs and directed new generation where it is needed. From 2000 to 2012, more than 10,000 megawatts (MW) of generating capacity were added and the average 2012 wholesale electricity price was the lowest price in the last 12 years.

Like all markets, there are always opportunities to review and provide minor adjustments to ensure efficient market outcomes that deliver reliable, cost-effective power to consumers. However, requiring businesses and individuals to buy their energy from specific sources is not a minor adjustment, and would have negative ramifications for a market that is working well.

Ken Pokalsky is vice president of government affairs for the Business Council of New York State.